"Extremely Undervalued Range" Despite Record-Breaking Results, This Sector Nears New Lows [Weekend Money]

Record-High Second-Quarter Earnings Expected for Korea's Foreigner-Only Casinos

Despite expectations for strong second-quarter results in the domestic foreigner-only casino sector, related stock prices have remained sluggish. As a result, the market is recommending an increased allocation to this sector.

Lee Kihun, a researcher at Hana Securities, stated, "Domestic foreigner-only casinos are expected to post record-breaking results and a positive earnings surprise in the second quarter. In addition to the benefits from the restoration of Korea-Japan travel, the expansion of short-distance routes due to high oil prices is also providing significant advantages to Busan." He added, "Lotte Tour Development and Paradise are expected to continue their record-breaking performance in the second half, with Lotte Tour Development strengthening its rolling competitiveness and Paradise benefiting from the ramp-up effect of newly acquired hotels. However, their stock prices are actually hitting new lows."

Paradise Hotel Casino in Busan.

Lotte Tour Development's drop amount and casino revenue in May reached KRW 256.8 billion and KRW 49.4 billion, respectively, marking a 19% increase compared to the same period last year. The number of visitors exceeded 63,000 for the first time. In June, a 5th anniversary baccarat tournament will be held, and with strengthened rolling competitiveness, sales are expected to remain at a similar level to April and May. As a result, the second quarter is expected to see all-time high quarterly casino revenue and operating profit of KRW 54 billion, surpassing the consensus estimate of KRW 50.9 billion.

Paradise also recorded an all-time high in May casino revenue at KRW 98.9 billion. The drop amount reached a record KRW 765.3 billion, significantly exceeding the two-year average of KRW 600 billion. According to Lee, monthly casino revenue is expected to surpass KRW 100 billion in the third quarter. He explained, "Due to the wide gap between the target price and the current share price, we are maintaining a very conservative estimate for average monthly revenue in the second half at KRW 80 billion. Even if we assume an average of KRW 85 billion per month, this year’s operating profit will exceed KRW 200 billion. When the Hyatt Regency acquisition effect is fully realized in 2027, the forecast P/E ratio will be 10 times, indicating an extremely undervalued range."

This content was produced with the assistance of AI translation services.